Reserves Motion — Speech by Louis Chua

Mr Speaker, my Parliamentary colleagues from The Workers’ Party have set forth our party’s position on the reserves.

Under the Net Investment Returns (NIR) framework, the Government can spend up to 50% of the long-term expected real returns on relevant assets. So up to 50% of the net returns from the reserves flow back to Singapore’s Budget through the Net Investment Returns Contribution (NIRC). The estimate of the NIRC is of course dependent on both the size of the net asset base, as well as the investment rate of return that can be expected to be earned over the long term, after netting off inflation.

Leader of the Opposition Mr Pritam Singh has shared how we should be more open about our reserves and reveal figures not for their own sake, but so as to facilitate mature conversations on the reserves to take place. In my view, the principles of transparency and accountability extend to not just the size of the reserves per se, but also to the investment returns generated by those charged with this responsibility.

Why is this important? While the real rate of return is by definition dependent on estimates of future inflation, which may not be entirely under the control of the Government given both domestic and global factors at play, the ability to earn superior risk-adjusted returns is a key driver of the NIRC and by extension its contributions to the budget.

As my parliamentary colleague Associate Professor Jamus Lim shared, our nation’s reserves belong to the people, not the Government of the day. It is important for the stewards of the reserves to be accountable to not just the Government, but to all Singaporeans, the key stakeholders of our reserves.

It is in this interest of accountability to the people, all Singaporeans, that I hope the GIC will adequately disclose its detailed investment performance both in absolute and relative to performance benchmarks terms, as well as corresponding risk analytics on at least an annual basis, rather than merely on longer term rolling time horizons. After all, if Temasek Holdings readily discloses such information on an annual basis, what is the justification for GIC not doing so? And further, it is not for the lack of such information that disclosure is not forthcoming. GIC produces quarterly and even monthly reports to the Government through the Accountant-General of Singapore, containing its financial statements, detailed holdings, bank account balances, detailed performance and risk analytics, as well as the distribution of the portfolio by asset class, country, and currency.

In addition to ensuring there is performance accountability, I would say another important aspect of ensuring that the entities managing our reserves deliver on the objective of generating good long-term real returns, is to ensure that all Singaporeans will be able to directly participate in such returns. I recognise that at present, this is achieved indirectly via the NIRC component of the annual Government budget. But what is preventing the Government from allowing regular citizens like you and me, from benefiting from the Government’s fund manager, GIC?

If the goal is to help present-day Singaporeans reduce their financial burdens and improve their quality of life, while continuing to save for future generations of Singaporeans and if I may add, ensure that present-day Singaporeans can save for their own retirement, it is imperative upon us to allow our citizens to benefit from higher investment returns in the long term, with adequate safeguards in place. 

This is especially pertinent when we consider the source of funds for the GIC in the first place. As stated in the GIC’s Governance Overview, its source of funds includes proceeds from the issuance of Singapore Government Securities (SGS) and Special Singapore Government Securities (SSGS), Government budget surpluses, and proceeds from the Government’s land sales.

What is so special about these Special Singapore Government Securities? Singaporeans’ CPF funds are invested in these SSGS issued by the Government, specifically to the CPF Board for the investment of CPF savings. The coupon rates for the SSGS bonds are pegged to rates at which the Board pays interest to the members of CPF. In other words, the CPF Board earns fixed interest income from the Government for these CPF funds.

Can we not allow GIC’s returns to be passed through to CPF members? The CPF Board’s FAQ answers this question by stating that, “Unlike in an arrangement where GIC’s returns are fully passed through to CPF members, the current arrangement means that CPF members bear no investment risk at all and CPF savings are safe regardless of GIC’s performance”. My question is, do we have such little confidence in the long term investment performance of GIC? 

If we look across to our Malaysian neighbours, its Employee Provident Fund (EPF) guarantees for its members a minimum dividend rate of 2.5%, with the actual dividend rate based on the performance of its investments. In the last twenty years, this has ranged from about 4.5% to 6.9%.

The difference between the current CPF interest rates, especially Ordinary Account rates of 2.5% and the long term nominal returns of the GIC portfolio are non-trivial. Based on the 20-year nominal returns of the GIC portfolio of 6.9%, and the CPF-OA rate of 2.5%, based on a simple rule of 72, the number of years it takes for our CPF monies to double goes from about 10 years based on GIC’s returns, to 29 years based on the prevailing OA rate! The effects on our ability to save for our own retirement is clearly tremendous! 

Moreover, CPF members can already invest their CPF monies, subject to certain safeguards such as minimum account balances and investment limits. Allowing CPF members to benefit from GIC’s portfolio even to a modest degree, with percentage or dollar amount restrictions in place, can make a huge difference in enabling more CPF members to better save for their retirement, and especially so for those who are not financially literate or savvy enough to do so themselves in the first place.

In each of the last three years, I have been urging the Government to implement the CPF Lifetime Retirement Investment Scheme (LRIS) to better support Singaporeans’ retirement needs. And based on public records, GIC’s 20-year returns have been consistently above the 2.5% interest rate offered to CPF Ordinary Accounts. Should the average Singaporean get access to the diversified investment portfolio of GIC, CPF members could get closer to retirement adequacy in a way that minimises the risk of short-term market volatility and protect their purchasing power against not just local inflation, but global inflation. I urge the Government to allow Singaporeans to directly benefit from our reserves management framework, to help both present day Singaporeans and future generations of Singaporeans.

Mr Speaker, in Mandarin please.



第二点是:政府不应排除动用超过目前的百分之五十的 “国家储备净投资回报贡献”(Net Investment Returns Contributions,简称NIRC)来减轻新加坡国人的负担。2018年,黃循财副总理在回答有关这个百分比的问题时,曾在国会里说过 “永远不能把话说得太过绝对” (never say never) 虽然在几年后他也有做过一些澄清。






I support the original motion, as filed by Mr Leong Mun Wai and Ms Hazel Poa.